Stopping the Clock On Retirement: Target Wealth Stopping Time Problems

35 Pages Posted: 6 Nov 2019 Last revised: 13 Nov 2019

See all articles by James W Shearer

James W Shearer

affiliation not provided to SSRN

Harvey J. Stein

Bloomberg L.P.; Columbia University - Department of Mathematics

Date Written: June 6, 2019

Abstract

Retirement planning attempts to build sufficient funds to retire at a fixed, predefined horizon. In that the only guaranteed way to hit a target wealth at a fixed horizon is by appropriate risk free investments, these strategies either have a large risk of falling short of the goal or require excessive savings.

In this paper, we investigate what we consider to be a more useful approach. Instead of optimizing wealth at a fixed future time, we optimize on the stopping time at which one has sufficient wealth. This builds on an approach to retirement suggested by Bode in "Retirement Investing: A New Approach", 2001.

Keywords: Retirement, pension, portfolio optimization

JEL Classification: G11

Suggested Citation

Shearer, James W and Stein, Harvey J., Stopping the Clock On Retirement: Target Wealth Stopping Time Problems (June 6, 2019). Available at SSRN: https://ssrn.com/abstract=3400400 or http://dx.doi.org/10.2139/ssrn.3400400

James W Shearer (Contact Author)

affiliation not provided to SSRN

Harvey J. Stein

Bloomberg L.P. ( email )

731 Lexington Avenue
New York, NY 10022
United States
212 617 3059 (Phone)

Columbia University - Department of Mathematics ( email )

New York, NY
United States

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